Republic Services, Inc.

Good afternoon and welcome to the Republic Services Second Quarter 2023 Investor Conference Call. All participants in today's call will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Aaron Evans, Vice President of Investor Relations. Please go ahead.

I would like to welcome everyone to Republic Services' second quarter 2023 conference call. John VanderArk, our CEO, and Brian DelGaccio, our CFO, are joining me as we discuss our performance. I would like to take a moment to remind everyone that some of the information we discuss on today's call contains forward-looking statements which involve risks and uncertainties and may be materially different from actual results. Our SEC filings discuss factors that could cause actual results to differ materially from expectations. The material that we discuss today is time-sensitive. If, in the future, you listen to a rebroadcast or recording of this conference call, You should be sensitive to the date of the original call, which is July 31, 2023. Please note that this call is property of Republic Services, Inc. Any redistribution, retransmission, or rebroadcast of this call in any form without the express written consent of Republic Services is strictly prohibited. I want to point out that our SEC filings, our earnings press release, which includes gap reconciliation tables and a discussion of business activities, along with the recording of this call, are available on Republic's website at republicservices.com. I want to remind you that Republic's management team routinely participates in investor conferences. When events are scheduled, the dates, times, and presentations are posted on our website. With that, I would like to turn the call over to John. Thanks, Aaron. Good afternoon, everyone, and thank you for joining us. Our strong second quarter results demonstrate the value created by our differentiated capabilities and the execution of our strategic priorities. We continue to successfully grow our business, both organically and through acquisitions, while enhancing profitability. During the quarter, we delivered revenue growth of 9%, including more than 4% from acquisitions, generated adjusted EBITDA growth of 10.5%, expanded EBITDA margin by 40 basis points, reported adjusted earnings per share of $1.41, and produced $1.26 billion of adjusted free cash flow on a year-to-date basis, a 10% increase over the prior year. We continue to effectively allocate capital by investing in acquisitions to create long-term value. Year-to-date, we invested $927 million in acquisitions. All transactions were in the recycling and solid waste space. including the acquisition of assets in Colorado and New Mexico from GFL. The M&A environment remains active with opportunities in both the recycling and solid waste and environmental solutions businesses. We now expect investment in value-creating acquisitions to exceed $1 billion for the year. We are making great progress on the integration of U.S. ecology and increasing the profitability of our environmental solutions business. Pricing realization in this business remains strong. Customers value our complete set of products and services. We have achieved over $110 million in new sales to date as a result of cross-selling our products and services. The sales pipeline is robust with opportunities for organic growth and expansion of services within our existing customer base. We achieved more than $40 million of annualized cost synergies. and EBITDA margin in the environmental solutions business improved to more than 22% in the quarter. The strong results we achieved through the first half of the year, along with the positive momentum in our business, supports a full-year financial outlook that exceeds our original expectations. We now expect revenue in a range of $14.775 billion to $14.85 billion, adjusted EBITDA in a range of $4.34 to $4.36 billion, adjusted earnings per share in a range of $5.33 to $5.38, and adjusted free cash flow in a range of $1.9 to $1.925 billion. Our updated financial guidance includes the contribution from acquisitions closed through June 30th. The results we are delivering are made possible by executing our strategy, supported by our differentiated capabilities, Customer Zeal, Digital, and Sustainability. Regarding Customer Zeal, our efforts to deliver industry-leading service continues to drive sustained customer loyalty and organic growth. Our customer retention rate remained over 94%, and we continue to see positive trends in our Net Promoter Score, supported by improved service delivery. Organic revenue growth remains strong during the quarter and simultaneously increases in both price and volume. Core price on related revenue was 8.8% and average yield on related revenue was 7.1%. This includes landfill MSW yield of 6.2%. This is the highest level performance in company history in this category. Organic volume growth on related revenue was 50 basis points. Turning to digital, we have reached a milestone in our efforts to create digital tools to enhance our customers' and employees' experience and deliver meaningful financial benefits. The deployment of RISE tablets in our recycling and solid waste collection business was completed during the second quarter. The next phase of our digital operations is expected to drive additional productivity savings through route adherence, improve safety performance, and provide more predictable service delivery for our customers. In total, we believe the benefits of our digital initiatives are worth approximately $100 million, with $50 million already achieved and $50 million to be captured over the next three years. Moving on to sustainability. We continue to invest in differentiating capabilities to leverage sustainability as a platform for profitable growth. Earlier today, we announced a joint venture with Rivago called Blue Polymers. This groundbreaking partnership further supports our efforts to lead in plastic circularity. Blue Polymers will utilize recycled olefins from our polymer centers to create blended pellets for use in manufacturing sustainable packaging. We expect to open four facilities beginning in late 2024 with earning contribution beginning in 2026. Development of our polymer centers in Las Vegas and the Midwest remain on track, with the centers becoming operational in late 23 and late 24 respectively. Demand for recycled plastics remains strong as the consumer goods industry continues to work toward achieving their sustainability goals. For example, we are partnering with a Coca-Cola company to supply recycled PET from our polymer centers for use in sustainable packaging. The 57 renewable natural gas projects being co-developed with our partners are advancing. We expect four of these projects to be operational by the end of the third quarter. Finally, we continue to believe that creating a more sustainable world is our responsibility and a platform for growth. We recently published our latest sustainability report highlighting the progress we are making on our 2030 goals. These goals are supported by investments we are making in polymer centers, the Blue Polymers Joint Venture, renewable natural gas projects, and fleet electrification. I will now turn the call over to Brian, who will provide details for the quarter. Thanks, John. Core price on total revenue was 7.3%. Core price on related revenue was 8.8%, which included open market pricing of 11% and restricted pricing of 5.3%. The components of core price on related revenue included small container of 12.3%, large container of 8.8%, and residential of 8.3%.

Average yield on total revenue was 5.9%, and average yield on related revenue was 7.1%.